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Analysts hail Vestas cost-cutting

1 August 2012
by John McKenna

DENMARK: Vestas' latest set of financial results have been hailed as the first positive piece of news from the turbine manufacturer in a long time, with analysts praising the firm's cost-cutting programme.

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Vestas yesterday announced its results for the second quarter of 2012. Revenue in Q2 was up 46% from Q1 to €1.6 billion, and pre-tax profit up to €40 million, compared to a €204 million loss in Q1.

Despite the hangover from poor results in Q1 and the second half of last year forcing Vestas to defer the testing of its financial covenants, analysts Bryan Garnier said the improved results in Q2 were encouraging.

In particular, Bryan Garnier praised Vestas’ cost-cutting efforts, which has since January seen the firm cut 2,335 jobs as part of a plan to reduce fixed costs by €150 million, primarily through streamlining support and closing factories where there is less market demand.

"Based on these preliminary results, we estimate that fixed costs are down -3.7% to €208m in Q2 12," said Bryan Garnier renewables analyst Julien Desmaretz.

"This is a -5.7% reduction from the highest level reached in Q4 11, though this remains 22% higher than in Q2 11. However, cash costs (R&D, administration and distribution) are down 15% quarter on quarter and 11% year on year. This is encouraging and we think management should be given some credit in its attempt to cut costs."

Desmaretz added that he also thought it likely Vestas would meet is 2012 sales target.

Vestas CEO Ditlev Engel said: "The preliminary first half-year figures for 2012 prove that Vestas has strongly improved its earnings and activity level in the second quarter of 2012 compared to the first quarter of the year. The figures clearly show that our cost-cutting efforts are starting to pay off, putting Vestas on the right track towards regaining profitability. In fact, Q2 2012 was a significant shift in earnings compared to Q1."